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Chapter 4
Conducting Business
Ethically and Responsibly
Copyright © 2006 Pearson Education Canada Inc.
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Learning Objectives
Explain how individuals develop their personal
codes of ethics and why ethics are important
in the workplace
Distinguish social responsibility from ethics,
identify organizational stakeholders, and
characterize social consciousness today
Show how the concept of social responsibility
applies to both environmental issues and to a
firm’s relationships with customers,
employees, and investors
Copyright © 2006 Pearson Education Canada Inc.
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Learning Objectives
Identify four general approaches to social
responsibility and describe the four steps
a firm must take to implement a social
responsibility program
Explain how social responsibility and
ethics affect small businesses
Copyright © 2006 Pearson Education Canada Inc.
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What Is Ethical Behaviour?
Ethics
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Standards or moral values that dictate
what is right and wrong
Culturally based
Formed upon society’s expectations
Vary by person, and by situation
Everyone develops their own “code of
ethics”
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Influences on Ethical
Behaviour
Personal Code of Ethics
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Family
Peer Group
Experiences
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Managerial Ethics
Behaviour toward employees
Behaviour toward the organization
Behaviour toward other economic
agents
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Assessing Ethical Behaviour
Gather the
relevant factual
information
Analyze the facts
to determine the
most appropriate
moral values
Make an ethical
judgment based on
the rightness or
wrongness of the
proposed activity
or policy
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Company Practices & Business
Ethics
Firms are creating ethical codes of
conduct to guide employee decisions
Top management support is essential
Adopting written codes
Instituting ethics programs
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Written Codes of Ethics
Increase public confidence in a firm or its
industry
Help stem the tide of government regulation
Improve internal operations by providing
consistent standards of both ethical and legal
conduct
Help managers respond to problems that
arise as a result of unethical or illegal
behaviour
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Social Responsibility
A business’s collective code of ethics
towards
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The environment
Its customers
Its employees
Its investors
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Organizational Stakeholders
Groups, individuals, and
organizations that are directly
affected by the practices of an
organization and that therefore have
a stake in its performance
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Areas of Social Responsibility
Responsibility
Towards
Environment
Responsibility
Towards
Customers
Social
Responsibility
Responsibility
Towards
Employees
Responsibility
Towards
Investors
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Environmental Responsibility
Issues
Air pollution
Water pollution
Land pollution
Toxic waste
Acid rain
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Customer Responsibility Issues
Rights of consumers
Unfair pricing
Ethics in advertising
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Consumer Rights Issues
Consumerism
Social movement
that seeks to
protect and
expand the rights
of consumers in
their dealings with
businesses
Consumers rights
Right to safe products
Right to be informed
Right to be heard
Right to choose what
they buy
Copyright © 2006 Pearson Education Canada Inc.
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Unfair Pricing Issues
Illegal pricing practices may occur due
to the intentional (illegal) limiting of
competition
Collusion
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A group of companies conspiring to fix
prices
Results in inflated prices and a lack of
competition
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Ethics in Advertising Issues
Increased attention to ethics in
advertising and product information
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Words and phrases such as “light”, “diet”,
“low fat”
Concerns about advertising that is
considered morally objectionable
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Ad campaigns by tobacco and alcohol
companies
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Employee Responsibility
Issues
Human resource management issues
Social responsibility issues
Privacy issues
Encouraging ethical behaviour
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Whistle-blowers
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Human Resource Management
Issues
Fair and equitable treatment of all
employees without discrimination based
upon sex, race, or other factors
Recruiting
Hiring
Training
Promoting
Compensating
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Social Responsibility Towards
Employees
Safe workplaces
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Socially and emotionally - no abuse or
harassment
Physically - safe work environment
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Privacy of Employees
How much control is acceptable in the
workplace?
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Drug testing
Video monitoring
Internet/E-mail Monitoring
Employees may not be aware or may not
know when they are being monitored
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Results in increased job stress
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Encouraging Ethical Employee
Behaviour
Top management support for ethical
behaviour is critical
“Whistle-blowers” are employees who
report unethical, illegal, and/or socially
irresponsible behaviour
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The company should support its “whistle
blowers” rather than threatening them with
dismissal or other penalties
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Responsibility Towards
Investors
Improper financial management
Cheque kiting
Insider trading
Misrepresentation of finances
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Improper Financial
Management
Doing a poor job of managing the financial
resources of a company
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Payment of high salaries, lavish expense accounts,
& other perks with little control over how money is
spent
May be legally unpunishable because no law
has been broken
It may be difficult to replace management
because unrest in the firm may devalue its
stock
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Cheque Kiting
Illegal practice of writing cheques
against money that has not yet arrived
in the bank account
A creative “cheque kiter” can write
cheques from account to account with
very little money to back it up
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Insider Trading
Using confidential (non-public)
information to gain from the purchase
or sale of stock
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Martha Stewart (ImClone shares)
Involves gaining knowledge of inside
information about the company prior to
making the purchase
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Misrepresenting Financial
Information
Companies must conform to accounting
guidelines called “generally accepted
accounting principles” (GAAP)
Failure to follow GAAP in order to inflate
expected profit figures can mislead
investors
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Small Business Ethics
A small business does not have the same
impact on society if it acts in an irresponsible
way
Many entrepreneurs decide to conduct
themselves in a socially responsible manner
because they feel it is important to contribute
to society
Individual entrepreneurs make independent
decisions
Copyright © 2006 Pearson Education Canada Inc.
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